From startup to small batch: when a craft business becomes a manufacturer

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How important is it that we continue to incubate small businesses so they become thriving companies?

Michael Porter, co-chair of the Competitiveness Project and the Harvard Business School, declared on CNBC’s Squawk Box. “We’re stalled in America. Our performance, economic performance, on many metrics is worse than we’ve seen in many generations. I mean not five years. I mean 10, 15, 20, 30 years,” he said. “The combined failure of the political system and business class has had a greater negative impact on small business.”

According to Harvard’s fifth annual U.S. Competitiveness Project report, the reasons are easy to identify and impact small business most. The study finds:

The United States retains key strengths in areas like higher education, entrepreneurship and capital markets. But those advantages have been offset by weaknesses in the corporate tax code, early and secondary education, infrastructure, the political system and health care.

Those problems have gone unsolved because Washington has failed to have an honest conversation about addressing them, and the country lacks a cohesive economic strategy, particularly at the federal level.

Colorado’s economy is small business-centric, as are many neighboring states, so as we enjoy a regional boom compared to other parts of the country, it’s a reminder that while things are good, not all may be well.

Yet small business success was the topic last week at a Denver Startup Week panel I moderated along with Brooke Wolfe of Merchants Office Furniture. The topic was ‘Startup to Small Batch – How Craftsmen Become Manufacturers.’ On the panel were founders from several companies we’ve profiled — including Winter Session, Topo Designs, Azure Furniture, and Waste Farmers — and two we’re excited to write about, Coda Coffee and Rachio.

Their stories are an intriguing mix of a passion and place, of determination and controlled insanity, really. How else do you explain a decision to stay the course after realizing those pesky details like relationships, weekends, and vacations take a back seat to running a business?

One pivotal point for small maker companies may be that moment — that opportunity — when a company evolves from craft business to full-fledged manufacturer. There are many existential moments for small businesses, but it was fascinating to hear when these successful entrepreneurs realized they’d graduated to another level. Getting more small business to this moment is the objective.

For John-Paul Maxfield, founder and CEO of Waste Farmers, it was a recurring financial theme. “We knew we were a manufacturer when our rapid growth required diligent attention to capital allocation as we invested significant capital into our manufacturing capacity to keep up with our current and projected sales,” he explained.

“When we grew from my garage into a slightly larger 6,000-square-foot facility that we leased, it never hit us that we were a manufacturer, even as we manufactured our products, it was just a logical evolution of being really excited about the products we were making. When we moved into the 80,000-square-foot facility we’d recently purchased to give us 10X capacity, that quickly brought the reality of the importance of the manufacturing component of our business to the forefront,” he added.

Topo Designs Mark Hansen also pointed to finances. “Our banking relationship became more important.”

Azure Furniture’s Corbin Clay had no doubt when they arrived. “I realized it when we had two shifts running, when 6 p.m. came around and I decided to head home, and everything just kept on going,” he said. “Production kept on running long after I left the building. That is when I realized that not only had Azure gotten much bigger than myself, but that it was a proper manufacturer; with SOPs, and policies, and managers. Pretty cool feeling.”

Tommy Thwaites of Coda Coffee had a similar experience. “My brother (and business partner) and I were always hesitant to take vacations at the same time — we always thought one of us needed to be there,” he laughed. “But we finally did and came back and were relieved, but not surprised really, that the lights were still on and things were running smoothly.” An exclamation point for the importance of the care of feeding of small business.

More on the journey of small manufacturers in coming weeks.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.

Manufacturing is losing the PR battle. Does it matter?

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Despite the best efforts of candidates Hillary Clinton and Donald Trump, manufacturing continues to get killed in the business press. In Monday’s debate, Clinton even used a term endearing to government and policy wonks — “advanced manufacturing” — to promote its importance.

But business media remains generally unimpressed. It’s more popular today for local and national voices to dismiss manufacturing as a relic than view it as integral to the future.

How else to explain the Denver Business Journal releasing its Book of Lists last week without a single manufacturer among the 22 finalists and 11 Power Book winners?

Manufacturing wasn’t even a category. Instead:

The Power Book is an exclusive look at business men and women in 11 industry categories who were prominent in the news over the last year or who, in our judgment, otherwise deserve recognition for recent business accomplishments.”

No manufacturing executives in Colorado deserve recognition? Astonishing.

As head-scratching the DBJ‘s omission, the national media is often more transparent in its anti-manufacturing bias. Here’s Forbes‘ Tim Worstall:

[T]he truth is that manufacturing simply isn’t important as a part of the economy these days. The attention we all pay to it is simply an historical overhang from when it was more important.

Worstall’s anti-manufacturing opinion is one thing. His bias is more problematic when he misleads with statistics. Worstall cites manufacturing’s share of “real GDP’,” arguing that its influence has diminished:

The truth is that manufacturing is only 15% of the entire global economy. And it’s some 12% of the US economy. . . . That is, it’s unimportant.

Was manufacturing “unimportant” in 1960? Quite the contrary. But using Worstall’s statistic of choice, ‘the truth’ is that manufacturing’s 50-year historical average has remained the same:

Manufacturing’s not the employment engine it once was. Today we make more with less workers. It makes manufacturing less important from an employment standpoint. It also makes it an industry in transition.

It should be easy for business media to see past the employment sea change, as dramatic as it is. As we’ve documented, American productivity has never been higher. Candidates running for president would do well to explain why manufacturing is important to the U.S. economy. Here’s a national perspective from Brookings:

  • Americans live and work in a global economy in which we exchange products we produce for those we consume. Manufacturers account for a very large proportion of our ‘tradables.’ If we’re to ever run a trade surplus again, we’ll do so because of manufacturers.
  • A strong domestic manufacturing sector offers a degree of protection from international economic and political disruptions. This is most obvious in the provision of national security, where the risk of a weak manufacturing capability is clear.
  • Manufacturing is often identified as an area in which much of the country’s research and development takes place, but as illustrated by industries such as pharmaceuticals and consumer electronics, manufacturing has become increasingly separate from research and development.
  • The long-term decline in the manufacturing share of employment has meant fewer jobs available at good wages for workers who lack advanced education. The loss of nearly 6 million jobs since 2000 has been damaging to workers who have been laid off, communities that have lost a vital source of employment, and to young workers who have found jobs in the sector.

How long can the list go? Try local reasons:

  • Colorado’s manufacturing sector is driving regional economic growth, through dynamic sectors like food and beverage and advanced fabricating. Visit the grocery store; you’ll see.
  • Consumers want more local and American-made products. If Colorado producers don’t make things for them, manufacturers from other states will.
  • Outdoor recreation, beer and spirits, and apparel are promising new manufacturing industries.

On the eve of the election, consider bias in media and how, if you’re a manufacturer, it matters.

And what you intend to do about it.

Bart Taylor is publisher if CompanyWeek. Reach him at baylor@companyweek.com.

We hope to see you Wednesday afternooon at the third annual Apparel + Lifestyle Manufacturing Summit in Denver to help advance regional manufacturing!

Utah’s new MEP—the University of Utah—a promising resource for local manufacturers

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The U.S. Department of Commerce channels resources to American manufacturing through NIST, the National Institute of Standards and Technology and its Manufacturing Extension Partnership (MEP) network.

It sounds like layers of government bureaucracy, but the MEP network is actually a diverse public-private mix, collectively pursuing the objective of supporting U.S. manufacturing. Today every state in the union has a single, federally supported Manufacturing Extension partner. Each is different: the national network is a mix of private sector, non-profit, university and local organizations, tailored to the meet the unique makeup of each state. The partners provide services “ranging from process improvement and workforce development to specialized business practices, including supply chain integration, innovation, and technology transfer.”

The feds require that entities occasionally ‘compete’ for the contract with NIST and the funding and support that comes along with it. It’s not an inconsequential amount of money: Utah’s new MEP, the University of Utah’s MEP Center, ‘will receive $16 million in funding over the next five years from both federal and state governments as well as local industry.’

The University of Utah competed to become Utah’s new MEP and in the end will replace Utah Valley University as the NIST partner. In Colorado, California, New Mexico and other centers throughout the West, MEP’s are hybrid organizations with university ties. Some operate for-profit businesses, many selling services to help manufacturers improve operational performance using concepts like Lean Six Sigma.

Yet Bart Raeymaekers and Bruce Gale, engineering faculty and authors of the grant proposal and recipients of the MEP charter, envisioned a different focus. I asked Raeymaekers what compelled the university to compete for the MEP opportunity.

“We noticed that the entire MEP system nationwide has been focused heavily on operational excellence, and realized that the future of manufacturing, and for small and medium sized businesses to compete in the global marketplace, that operational excellence can only bring you so far,” he explained. “You can only shave so much costs from your operation. Ultimately, we believe you have try to grow top line line revenue to compete.

“What we’re really good at in this country is technology and innovation and that’s what we’re going to focus on,” he added. “That was the the new paradigm we pitched — helping companies drive top-line revenue growth while still providing operational excellence to grow profits.”

Utah’s new center will accomplish this by introducing companies to technology and leveraging America’s great R&D advantage, a common theme now emerging nationwide as manufacturing reinvents itself.

“We’ll be heavily focused in helping companies focus on implementing advanced manufacturing technologies, help them innovate w their processes and products,” Raeymaekers said, “to go after new markets, help them with business intelligence to do that (data-driven intelligence) and at the same time also provide workforce education, because if you want to implement new technologies, you have to train workforce and management to be able to adopt these new technologies within the company.”

Yet the manufacturing opportunity today is much more than high-tech manufacturing. For one, consumers are driving demand for locally-made products to satisfy new tastes for craft or on-demand products. Today consumers are reshaping the manufacturing landscape as much as technology. It’s not lost on Raeymaekers. I pointed out that Utah boasts a healthy mix of high-and-low-tech manufacturing.

“First of all you’re right. We did an analysis of Utah’s sector and it’s certainly not all high-tech. But our center will be focusing on process and product innovation, advanced technologies, workforce education, and operational excellence, all of which really apply to all different sectors. We can bring the same tool sets and skill we have on staff to serve manufacturers independent of the sector they’re in.”

He also added, insightfully, “Even if you’re making tee-shirts, you can still benefit from data-driven business analytics — the best markets to pursue or products to launch. We have those tool sets available and want to deploy across the entire manufacturing sector.”

Lastly, Raeymaekers pointed out the Center will also help companies acquire capital and financing, a critical service as manufacturing truly develops from small business upward. “If companies are to innovate that means they need to get funded. We want to link companies with investment sources to provide financing, including subject matter experts at the university to help small business go after technology grants, for example.”

Music to my ears. We’re excited to work with Utah’s new MEP to bring the first Manufacturing Growth & Financing Conference to the state in the spring of 2017.

Also, more on how the Center will arm Utah manufacturers with advanced technologies in the coming weeks. In the interim, contact Bart Raeymaekers at bart.raeymaekers@utah.edu.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

CompanyWeek at year three: six new takeaways for regional manufacturing

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I look back on my column from a year ago — CompanyWeek at two years: Six takeaways as manufacturing surges — and grimace. I’ve learned so much in a year.

With that in mind, as CompanyWeek begins year four, here are six new takeaways based on a fresh look at last year’s conclusions and what I got wrong – and right.

Last year’s takeaway: 1. Manufacturing’s cross-industry comeback continues unabated.

Today it would be more accurate to say that productivity growth continues unabated, though some industries are faring better than others.

As we’ve chronicled all year, food and beverage manufacturing is the fastest growing sector in the state, confirmed again last week by the Denver Business Journal. Aerospace and bioscience manufacturing, transformed by technology and benefitting from Colorado’s rich innovation ecosystem, are equally dynamic. The seeds of a true American manufacturing comeback in outdoor gear and accessories is also germinating, but supply-chain challenges are a drag on what otherwise is promising long term prospects for more Colorado-made products.

Manufacturers wed to energy or growth in overseas markets are more challenged. Consumer products made here face stiff competition from global competitors, who still manufacture less expensively. Workforce continues to be a barrier for others.

But despite these headline-grabbing challenges, manufacturing is a new regional economic force, with consumers driving innovation on one hand, and automation and high-tech fabrication reshaping the sector on the other.

So here’s the new takeaway: It’s not all roses, but manufacturing’s new look is manifest in Colorado and the West.

Last year: 2. Public and private sector support isn’t keeping pace with manufacturing’s advance.

Last year I bemoaned the spotty understanding of manufacturing among those who report on economy or provide development services often using taxpayer dollars. The business press is still maddeningly uninformed; witness the hyperventilating last week about the PMI falling under 50 for the first time in six months.

But manufacturers are changing the perception of the sector by reshoring jobs whenever possible and creating a new era of U.S. competitiveness. Development of the supply chain is critical. The revelation is that we don’t fully understand what supply chain development means.

New takeaway: It’s cool to be a manufacturer again, but as the supply chain goes, so goes manufacturing.

Last year: 3. Manufacturing should be a ‘Key Industry’ in a simplified economic Blueprint.

Last year I argued that dropping ‘Advanced’ and listing ‘Manufacturing’ as a key industry sector would shine a well-deserved light on all manufacturing and simplify access to a confusing system. It’s still a good idea. We learned last week that Government Workers Now Outnumber Manufacturing Workers by 9,932,000. Manufacturers need less blueprints, associations, new designations, and taxpayer-funded bureaucracies.

Today manufacturers are quick to advocate smaller government and less regulation. We’re less enthusiastic about rolling back a raft of taxpayer-funded subsidies, awards, and grants coursing the system, many without accountability that seperates worthy investments from well-intentioned spending.

New takeaway: Less regulation or more public-sector programs? Which will you have?

Last year: 4. Congressional inaction in support of manufacturing is a travesty.

Elected officials do less and campaign more. As we lower our public-policy standards, it’s important we ramp up private sector efforts to get important things done.

Beyond that, it’s up to local officials to lead. Want to get in the manufacturing game? Develop a small business ecosystem friendly for startups and supply-chain infrastructure that sustains maker-business growth.

New takeaway: Work through the private sector to get things done — and go directly to voters with key issues like infrastructure.

Last year: 5. Where robust support has developed, it now must evolve.

See all of the above. Manufacturing growth hinges most on private/public collaboration around supply chain development.

One other tactic worth a big mention: Brands making things here still face consumer resistance on price. For many maker businesses, it’s still more expensive to make things in the U.S. Colorado’s marketing messages should evolve to support brands operating here. Raise the profile of Colorado-made products. Borrow a few dollars from tourism’s massive war chest to fund a national campaign about the high-quality, authentic products made here. Don’t add to the ad spend; refine it on behalf of industry.

New takeaway: Use Colorado’s strong tourism brand to better promote the state as a destination for lifestyle manufacturing.

Last year: 6. Manufacturers must agree on the way forward — one that involves a bigger tent.

Last year this column was a call for recognition of the sector. Things have changed: manufacturing’s profile is higher, it’s companies and leaders now the topic of conversation statewide and focus of more media coverage.

It’s time to play the role of leading economic driver and ask less of government, trade, and those we elect. Let’s put campaigning and campaign promises behind us.

New takeaway: 2017 is the year of the private sector — the year of the manufacturer.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

Manufacturing’s change-makers

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If foundries and fabricators are the heart and soul of manufacturing, today craft and lifestyle brands are its upstart rebels, tipping over convention and carving fresh tracks through and around an ecosystem never designed with its interests in mind.

Just the opposite. Craft food and beverage manufacturers have labored against a bulwark of industrial competition to gain a foothold but now lead a consumer revolution. Competitors are now envious suitors. Apparel and outdoor products enthusiasts intent on developing authentic, local brands work against a supply chain that was offshored wholesale in the late 20th century. But entrepreneurs find a way and today they plant the seeds for new U.S.-made industry, and model innovation and passion the multinational set covets.

In many ways these brands represent manufacturing’s future every bit as much as the tech-informed advanced manufacturers also changing our industrial landscape. Makers share a connection.

Here’s where we’re failing our rebellious vanguard. Support is often lip service and nothing more — even from manufacturing brethren. We’re prone to dismiss cutters, benders, and welders as relics but also frame the low-tech world of cut-and-sew or small-batch food processing as somehow beneath our aspirations as an advanced manufacturing community. For many, satellites are the end game, not saison or sweatshirts.

It’s a mistake to exclude any manufacturer. We should fancy them all.

For one, if we’re to change the perception of manufacturing, the new face of industry must include makers and manufacturers that resonate with a new generation. Today it’s a wide cross-section of neo-industrialists making ‘beer, food, clothes, skis, bicycles, and electric cars.’ Sally and Sam may not be interested in a career in rocket assembly or catheter fabrication, but may be in fashion design or advanced food processing and distribution. Or a manufacturing opportunity with an inherent social mission that helps scratch an itch.

A healthy cross-industry make-up also sustains the sector when select industries struggle. A perfect storm developed early this century when the U.S. auto industry imploded at the height of our infatuation with offshoring. Even the U.S. government was in the game. We invested in Russian-made rocket engines and manufacturing infrastructure in places like Vietnam, today a lifestyle manufacturing haven for U.S. brands.

Closer to home, pundits muse on the troubles ahead for Colorado’s craft beer sector. But if we look back, it was U.S. craft entrepreneurs sowing seeds for a more diverse sector. Ensuring manufacturing’s success means supporting a broad resurgence of industry.

So this week as CompanyWeek features a slew of upstart lifestyle manufacturers, embrace the change-makers. Revel in a new generation of manufacturers making it impossible to ignore the barriers we’ve thrown up that thwart our industrial ambitions — and their success.

And rally around the rebels.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.

Competing to thrive: Utah workforce vs. Colorado high-velocity industry. Who has the edge?

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In three years of profiling Colorado manufacturers and two years writing about Utah’s sector, it’s easy to understand why economic developers from each state view the other as primary competition. The attributes of each sector are strikingly similar.

It’s hard, for example, to distinguish between aerospace and bioscience contract manufacturers fabricating for high-profile OEMs; between world-class gear and outdoor industry brands; or the development dialogue that’s an envy of other states not benefitting from the in-migration of talent, money, and ambition. Both states boast great R&D research universities, transferring ideas and talent into the commercial stream. There are other similarities, much to do with the general appeal of the West.

There are differences. Utah is flush with consumer product brands compared to Colorado, where manufacturing is more significantly informed by ranching and agricultural. Colorado’s craft beverage sector has a gravity of it’s own, attracting like-minded businesses and a growing supply chain. In Weber County Utah’s perfecting a regional cluster strategy around outdoor industry that Colorado officials envy, going so far as to emulate a state-level outdoor industry office to both steward resources and attract world-class companies.

But two differences stand out. Both translate into a distinct competitive advantage — or potential missed opportunity for the other guy. How each responds may tip the competitive balance.

Utah is winning the workforce development game, maybe even nationally, no small feat or inconsequential advantage. Colorado manufacturers are significantly more challenged to find the next generation of industrial employees. On the other hand Colorado’s high-velocity natural and organic products industry is an economic engine of its own, driven by a world-class ecosystem that starts and incubates early-stage companies. Food and beverage is the state’s fastest growing manufacturing sector.

Is either a game-changer that tips the competitive balance? Can either state play catch-up and obviate the other’s advantage?

Utah’s workforce advantage is a beacon for manufacturers. Simply, the state’s developing the next-generation talent manufacturers need — educated, tech-savvy and capable but also shaped positively by Utah’s cohesive community. Utah’s sons and daughters leave, many on Church of Jesus Christ of Latter-day Saints missions, but return often fluent in another language, motivated and exposed to the world, to start careers and families surrounded by people of the same faith.

It results in workforce advantages difficult to replicate.

But a community bent on challenging conventional wisdom attracts its own talent and energy. Many of the companies that launched a natural and organic products revolution from Colorado are now multi-million dollar brands — as are its craft beer counterparts. And the ecosystem of resources that’s developed to support early-stage company growth is at once highly developed and attracting new players. Wall Street’s taken up residence in Boulder County.

In the long view, Utah’s workforce advantage may be harder for Colorado to replicate. The factors that combine to undergird workforce development here are unique. And the ecosystem that coalesced in Colorado to provide a foundation for innovation and fast-growth can certainly develop in Utah. Companies like PROBAR, Creminelli, and Kodiak Cakes, all companies we’ve featured, are an incredible foundation. They’re national brands leading their own local revolution.

Yet our interest has always been promoting the region — not just the attributes of a single state. As the region goes, so will its key players. As Colorado and Utah compete, it’s fascinating to speculate how competitive the combined manufacturing assets of both states might be on the international stage.

A Western Manufacturing Consortium of developer’s dreams.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

President-elect: Focus on domestic supply chains not trade agreements to grow manufacturing

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Hillary Clinton’s nod to Denver’s Knotty Tie at the Democratic National Convention — or was it Neil Borin’s Carrot & Gibbs? — is only the latest example of how manufacturing is influencing the 2016 general election. (Given U.S. Treasury Secretary Jack Lew’s visit to Knotty Tie last March, which we chronicled, she probably meant the former.)

Of course the sustained posturing from each candidate about manufacturing relates to international trade agreements and their impact on jobs. But like this election, there’s nothing conventional about how each views the issue. Candidate Trump could be confused for a pro-labor Democrat, angling to win Rust Belt states by blaming NAFTA and the pending TPP treaty for driving manufacturing jobs — union jobs — offshore.

Clinton seems bent on threading the needle and playing both sides, and as a result I can’t say today if I understand her position for or against. I can only surmise that in keeping with the craziness of the election, she’s aligned more closely with the dependably pro-Republican National Association of Manufacturers than Trump in generally favoring free trade.

Neither, really, articulate a reasonable alternative to the nation’s trade agreements or a fix that would actually benefit U.S. manufacturing. And there are clearly better ways to support the American manufacturing resurgence, full on underway, than canceling trade agreements to force companies to reshore jobs or stop sending them overseas, agreements that also open markets to U.S. companies.

The reality is that most are already considering more U.S.-based manufacturing, with good reason. Overseas labor is increasingly expensive. Quality and intellectual property are hard to control. Prototyping takes forever. Bottom line: Companies are simply weary of managing a 10,000-mile supply chain, and won’t if they don’t have to. The sheen is off. Owning and operating a multinational manufacturing company today if flat-out hard.

Instead, companies are interested in U.S. operations that enable them to tap a wave of new technology from America’s R&D engine. They seek to respond in real time to changing consumer tastes here and abroad — meaning speedier go-to-market outcomes made possible by shorter supply lines including locally sourced raw materials and labor. Yes, labor. A sea change is underway. We’re on the front end of a national movement to rediscover manufacturing careers. It’s driven in part by manufacturing’s new connection with millennials who want to buy locally made beer, food, clothes, skis, bicycles, and electric cars.

Want to engage in a real conversation to advance U.S. manufacturing? Be an advocate for the domestic supply chain so that U.S. manufacturers have everything they need to make things here, including labor. Want more apparel made in America? Rally support for initiatives like the Rural Colorado Apparel Manufacturing initiative, born right here, to develop cut-and-sew labor infrastructure brands need. Want major brands like Nike and Apple to make more shoes and iPhones in America? Invest in urban skunkworks that incubate technology and skilled labor that connects R&D with manufacturing processes. Start over. Embrace the design-to-manufacturing continuum, not just the design. Help Nike and Apple rediscover domestic manufacturing by reinventing processes and doing it in small batches, here, first.

It’s a campaign issue that could actually unite a divided electorate: Embrace manufacturing as a cause célèbre, without vilifying companies for pursuing the resources needed to build quality products alongside growing profits.

As candidate Trump and Clinton allude to reimaging manufacturing, we’re doing it. On the heels of the second annual M2 Manufacturing Growth & Financing Conference, we’ll convene at the third annual Apparel + Lifestyle Manufacturing Summit this September to connect brands with a growing supply chain.

If you’re interested in advancing U.S. manufacturing, and not politics, you’ll be with us September 28 in Denver.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.

Utah 4th, Colorado 13th in aerospace manufacturing ranking as more confusion reigns

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Data continues to trickle out this summer that ranks and grades states for business and manufacturing prowess. It’s been a better month for the region even as analysts and journalists continue to struggle to get a handle on a fast-changing manufacturing sector.

In CNBC’s annual ranking of America’s Top States for Business 2016 Utah grabbed the top spot, Texas was second and Colorado third. California (32), New Mexico (39), and Nevada (40) found the lower half of the rankings among other western neighbors.

Utah also crashed the top five of PricewaterhouseCoopers’ 2015 Aerospace Manufacturing Attractiveness Rankings, with an impressive overall ranking of four. Colorado was 13th. For Utah, it’s a strong comeback from the Conexus Indiana report that confounded as much as it informed. Despite awarding the state three As out of eight categories, the report gave Utah’s manufacturing sector an overall grade of C. The PwC report is a deserved correction.

Washington, home to global powerhouse Boeing, ranked 12th and pundits there weren’t pleased. The Seattle Times‘ John Talton was incensed:

Washington boasts one of the planet’s two largest aerospace clusters (along with “Aerospace Valley” in Toulouse, France). In addition to Boeing, more than 1,300 aerospace-related companies are located here. In May, 91,700 employees worked in aerospace product and parts manufacturing. This is the backbone that makes Washington the nation’s third largest state for merchandise exports. Aerospace education is ubiquitous. Oh, as for taxes, don’t forget the nearly $9 billion in aerospace tax breaks associated with the 777X.

He concluded, with a sneer, “it appears the rankings are a combination of statistical fluke and reliance on local (potentially boosterish) reports”.

But as we’ve documented the past few weeks, manufacturing is confounding most everyone who’s measuring or writing about it.

Patty Silverstein, president and chief economist at Development Research Partners in Jefferson County, Colorado, chalks up growth in Colorado’s food and beverage manufacturing sector to cannibas. But she’s not sure.

Silverstein made the correlation referencing growth in food manufacturing numbers in a Denver Post article last week:

Recreational cannabis sales began in 2014. That year, “we had a 3.5 percent increase in employment. In 2015, a 4.9 percent increase in food-manufacturing employment,” she said. “The data doesn’t allow us to slice and dice to say, ‘These are indeed edibles or not,’ but the recognition is this is where they would be classified.”

She continued:

“Is it cavalier of me to say (manufacturing growth is directly correlated to the cannabis industry)? Absolutely,” she said. “I cannot prove or disprove it. But you look at who are the new entrants.”

It’s a surprising admission in light of other data and stories we’ve uncovered the past two and a half years, in the form of our weekly features on Colorado’s proliferating food and beverage companies. The ‘new entrants’ are dozens of innovators changing the national food conversation from Boulder, Fort Collins, and Denver and pitching their ideas across the state. They’re in plain sight.*

Colorado economic development officials can’t seem to believe their eyes either. How else to explain the comments of Laura Blomquist, senior manager of strategy and analytics at the state’s Office of Economic Development and International Trade?

In celebrating the state’s strong “knowledge-based” economy and high-percentage of educated workers, Blomquist used words that marginalize Colorado’s strong manufacturing economy. “The United States is transitioning to a post-industrial society increasingly comprised of knowledge-based enterprises,” she said. “These enterprises create higher paying jobs that typically require significant preparation through higher education and a high degree of complexity and innovation in the work itself.

I read recently the U.S. Secretary of Commerce refer to new manufacturing jobs as the “IT jobs of the future.” With manufacturing companies here and elsewhere struggling to find qualified employees, it’s time to roll out a new vocabulary that better meets the needs of a neo-industrial society that includes modern manufacturing.

We’d all be less confused.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.

[*Panelists will be providing an update on Colorado’s natural and organic food sector at next week’s Manufacturing Growth & Financing Conference in Denver. Register here.]

‘Lies, damned lies and statistics’: Parsing manufacturing data an exercise Twain would appreciate

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“There are three kinds of lies: lies, damned lies, and statistics.”

Mark Twain’s frequently used quote was my first thought when reading the Conexus Indiana 2016 Manufacturing & Logistics Report Card for the United States.

Covered in a recent column by CompanyWeek‘s Bart Taylor, the report gave Colorado manufacturing a D grade for overall manufacturing industry health. It looked at eight different categories when developing this grade: Logistics Health (C-), Human Capital (C+), Worker Benefit Costs (B), Tax Climate (C), Expected Fiscal Liability Gap (C), Global Reach (D), Sector Diversification (C), Productivity and Innovation (B).

Are these grades an accurate reflection of the Colorado manufacturing sector? Is the report an unbiased measurement?

Conexus Indiana, the group responsible for the report’s development and publication, is a private sector led initiative similar by mission to the Colorado Advanced Manufacturing Alliance (CAMA). The first page of the report proudly states, “Conexus Indiana is focused on making Indiana a global manufacturing and logistics leader.” The actual data collection and analysis was completed by Indiana’s own Ball State University.

Did I mention Indiana got an A grade?

I will let you decide if I am guilty of an association fallacy, or if you agree that this report card is suspect because of its association with Conexus and Ball State.

For the sake of argument, let’s assume there are no “Indiana biases,” and the data is sound. After all, the report cites its sources which are generally from our own federal government. For example, when dispensing grades for Global Reach (the level of international trade in both imports and exports), the reports cites the U.S. Department of Commerce International Trade Administration. For the previous five years, Conexus has given Colorado the following grades for Global Reach: D+/2011; F/2012; D/2013; D/2014; D+/2015; and a D this year in 2016.

Ironically, I pulled from my files a March 2013 article by Bruce Goldberg, then with the Denver Business Journal. This article reported that Colorado was one of only 11 states to grow exports in double digit percentages from 2011 to 2012. What was the source for this positive report? The same U.S. Department of Commerce International Trade Administration data used by Conexus and Ball State. To refresh your memory, in 2012, Conexus gave Colorado an F.

Damned lies and statistics!

Does that mean I believe Colorado should have all As? Absolutely not. While I might cast reasonable doubt on the validity of this report, I am not willing to suggest Colorado isn’t woefully lacking in many of these areas.

Conexus’ category on Human Capital provides a nice example. According to the report, Human Capital measurements include rankings of educational attainment at the high school and collegiate level, the first-year retention rate of adults in community and technical colleges, the number of associate degrees awarded annually on a per capita basis, and the share of adults enrolled in adult basic education.

Conexus gave Colorado a C in this category. Probably a fair grade as workforce continues to be the number one issue facing Colorado manufacturers. But the report only looked at statistics. Statistics gathered by the government are always a lag measure. The Conexus report fails to report on the positive steps Colorado manufacturers are taking today to fundamentally change the way we build our future workforce.

Business and Schools in Collaboration, or BASIC, is designed to help manufacturers make their next generation of workers through internships and apprenticeships and put an end to the inflationary practice of buying our workers from neighboring companies. Using the Innovative Industries Internship Act, a program CAMA helped create with Representative Pete Lee from Colorado Springs, more than 162 Interns are currently involved in experiential learning with Colorado businesses. In light of this, I would certainly expect Colorado to have a higher grade in the near future.

Unfortunately, the same cannot be said in other categories. Ask any Colorado manufacturer if the state’s Tax Climate is favorable for manufacturing. Don’t be surprised if they give Colorado an F.

Another area where Colorado manufacturers might suggest a lower grade than that provided by Conexus is Logistics Health. Traffic congestion is a well-known fact in Colorado. What manufacturers understand better than most is that congestion costs drivers $1.35 billion annually in delays and fuel. When you have to ship product by truck, these costs are passed on to the shipper, adding to the cost of goods sold and reducing profitably. With a $25 billion transportation funding shortfall looming over the next 25 years, something must be done to improve Colorado’s highway infrastructure, or you can expect to see lower Logistics Health grades in the years to come.

While the validity of the grades posted by the Conexus report may be suspect, the issues they identified are real. Over the next four weeks, CAMA will examine, with industry experts, four of the topics: Human Capital, Logistics Health, Tax Climate, and Global Reach. We will discuss the issues in more detail and outline specific action items manufacturers can take to improve the situation. In many cases, improvements will come only through legislative actions. In other areas, manufacturers can take unilateral actions to improve their own and the Colorado manufacturing industry’s health.

Next week’s column will take a closer look at what the World Trade Center has to say about Colorado’s export/import climate, what they are doing to help the Colorado manufacturing sector, and how you as a manufacturer can take advantage of these opportunities. Stay tuned.

Tim Heaton is president of CAMA. Contact him at tim.heaton@co-cama.org.

Utah gets a ‘C’ in manufacturing but flashes workforce advantages

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In Colorado we’re ruminating over two reports released last month that rank the state’s manufacturing sector poorly. Tim Heaton, president of the Colorado Advanced Manufacturing Alliance, follows up on a column I wrote about the Conexus Indiana 2016 Manufacturing & Logistics Report Card for the Unites States that gave Colorado a ‘D’ in overall health for its manufacturing sector.

Utah fared better, but not much. Despite ‘A’ grades in three of the eight categories, Utah’s overall grade was a ‘C’, placing it behind such manufacturing juggernauts as Connecticut, Kansas and Tennessee. Both states also did poorly in a Site Selection magazine ranking of ‘manufacturing investments per capita’, a measure of million-dollar capital investments in manufacturing facilities per million residents. Colorado ranked 47th, Utah 39th.

Both Heaton and I found plenty to grumble about, especially in the Conexus report, from dated data to questionable methodology. I suspect that when or if Todd Bingham at the Utah Manufacturers Association gets around to responding he’d have similar issues with data that’s almost three years old, or bias that tends to award legacy logistics and supply-chain infrastructure that today struggles to support emerging growth sectors.

But the data is not without merit. It provides meaningful perspective for those like us who aspire to develop world-class manufacturing ecosystems. Wanna know how far we have to go? Kentucky ranked 1st in per capita investment with 173 manufacturing projects topping $1 million in capital or involving 20 new manufacturing jobs. Colorado and Utah each had nine. Think rust-belt legacy doesn’t matter? Think again.

Colorado’s ‘D’ grade is also focusing the conversation on areas where indeed, the state’s logistics and support network undermines economic development and manufacturing investment. Transportation may top the list. Interstate 70 has a reputation that transcends the state. It’s a lesson in inaction Utah policy-makers would do well to learn and not gloss-over.

Utah’s ‘A’s, in Worker Benefit Costs, Tax Climate, and Expected Fiscal Liability Gap, and a ‘B’ in Human Capital underscore its transparent workforce strength, a building block for success in manufacturing. Where other states are forecast to struggle mightily to train and equip a next generation of employees, Utah seems extraordinarily well-positioned in this critical area. Companies like JD Machine, profiled this week in CompanyWeek, are national models in adopting progressive workforce development strategies.

Ironically, Utah’s ‘B’ in Sector Diversity may play more to Conexus bias than communicate a true strength of the sector today. Yes, bioscience, aerospace and advanced manufacturing lead a fairly diverse sector that also boasts industrial food and energy stalwarts.

But manufacturing diversity in the future will also be defined by robust, dynamic artisanal sectors responding to changing consumer tastes that favor locally made food and beverage and lifestyle and consumer products; or feature a wave of start-up, technology-informed manufacturing companies that sustain world-class innovation in whatever form. Is Utah a hotbed of entrepreneurship and innovation in manufacturing, sustained by a progressive vibe that informs business environments in California, New York and even Colorado?

Yes and no. I’ve written extensively about Utah’s emerging leadership position as a hotbed of outdoor industrial development, namely Ogden’s growing ecosystem of lifestyle manufacturing companies and initiatives.

But at times, the cultural attributes that provide economic stability and offer sustained workforce advantages in Utah don’t translate into the state being a trend-setter. For example the natural and organic food tsunami of the past decade, a true revolution that’s changed the way America eats, has been slower to catch on here. It’s altered the economic landscape in neighboring Colorado and farther west in Oregon and Washington, where a food manufacturing renaissance is long underway.

Better late than never. We’re involved in a conversation with innovators in Utah’s natural food and products space to accelerate development of sector that’s simmering just under boil. More on this initiative soon.

On balance, other states like Colorado and California would likely trade manufacturing challenges with Utah as states strive to improve the sector. Workforce is a deep, systemic challenge that requires myriad investments — and time. Standing-up resources to accelerate growth in promising new sectors feels less daunting. We’re about to find out.

Improving Utah’s ‘C’ grade will be a positive outcome.